Homeowners have confidence in Canada's housing markets

The 2019 Mortgage Consumer Survey report from Canada Mortgage and Housing Corporation is out, detailing the thoughts, attitudes and behaviours of Canadians who have purchased a home in 2019.

Coming as no surprise, affordability was the number one issue for buyers. Something that might raise a few eyebrows in certain quarters is a majority of respondents said the stress test had no impact on their decisions to buy a home.

CMHC conducts the survey every year, this year polling 1,385 first-time and repeat buyers all across the country. Respondents were required to be the prime decision makers in their households and had all undertaken a mortgage transaction in the past 18 months.

Of the respondents, 61 percent were female, so obviously 39 percent were male. All respondents were 18 years of age or older, with the bulk in the 25 to 34 cohort. First-time buyers made up 47 percent of respondents; 53 percent were repeat buyers.

Here are highlights from the report.

Homeownership costs

There was a dramatic decrease in the number of buyers who chose to spend the maximum amount they could afford on their homes, says CMHC.

“This suggests that many Canadians may be shying away from the house-rich, cash-poor approach of past years. In 2018, 78 percent of home buyers bought the highest-priced home they could afford. In 2019, that number fell to just 60 percent.”

Nearly one-third of buyers spent $300,000 to $499,000 on their home purchase in 2019. Roughly 20 percent spent more than $500,000.

Buyers were equally divided between the three downpayment categories: More than 20 percent; 20 percent, and; less than 20 percent. Of those putting down less than 20 percent, 53 percent cited a lack of funds as the main reason. The balance said it was to keep some of their funds for other expenses (27 percent) and wanting to be comfortable at their current debt level (14 percent).

Almost one-third of those with a downpayment of 20 percent or more did so to avoid paying mortgage loan insurance. Others wanted to reduce the amount of interest they had to pay (28 percent) and pay down their mortgage as soon as possible (26 percent).

The stress test

CMHC conducted the survey more than a full year after the stress test was introduced and found 59 percent of respondents were aware of the new mortgage qualification rules, while 76 percent of all buyers aware and not aware of the test said it had little or no impact on their decision to buy a home. That number is down slightly from 80 percent in 2018.

Those who were impacted were still able to buy their homes by making compromises, such as buying a smaller home (52 percent), a less expensive home (61 percent), cutting back on expenses (60 percent) or dipping deeper into their savings (59 percent) to come up with a larger down payment. (Respondents were allowed more than one answer.)

Interestingly, 65 percent of all the home buyers surveyed felt the stress test would help keep more Canadians from taking on a mortgage they can’t afford in the future.

Wants and needs

There’s an old adage about home buying that identifies three of the most important things to look for in a property — location, location, location.

However, “For the majority of Canadians who bought a home over the past year, the most important factors affecting their decision were price and affordability,” says CMHC. “When asked to name their top three must-haves in a home, more than 66 percent of the buyers who took part in the survey said either price/affordability (80 percent), number of rooms (73 percent) or proximity to public transit (67 percent).”

One-third of buyers said affordability was their single biggest need, a slight increase over 2018. A full 80 percent of buyers said finding a home they could afford was a necessity.

When it came to the ‘wants’, the top three were: Buying a newly built home (73 percent); looking for a fixer upper (63 percent), and; proximity to shopping, restaurants and entertainment (58 percent).

A move-in ready home was far from the top, with only six percent saying it was their most important want. That’s down from 11 percent in the 2018 survey.

Notably most home buyers said the type of neighbourhood was more of a want (56 percent) than a need (44 percent).

Attitudes and behaviours

“The vast majority of home buyers in 2019 had a positive attitude towards the idea of buying a home,” says CMHC. “Close to nine out of 10 buyers were happy (47 percent) or excited (39 percent) about buying a home. However, 34 percent of buyers surveyed also said that buying a home made them feel stressed, with 10 percent saying the whole process left them feeling frustrated.”

Respondents were very much confident in the long-term financial prospects of homeownership and their ability to make their mortgage payments at 87 percent.

Other signs of steady consumer confidence in Canada’s housing markets are 32 percent are paying more than their minimum mortgage payment, most were consistent in their monthly budgets both before and after buying a home and 61 percent set aside a buffer for possible higher expenses in the future.

For the most part, the survey points to the fact Canadian homeowners have a good understanding of the buying process and the value of owning a home.

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